Thursday, February 02, 2017

Blast from the past: false price claims insufficiently pled

At this point I will just institute a “blast from the past”
category for Westclip. This one made it
because of a discussion of Twiqbal
plausibility for false advertising claims based on allegedly false pricing. Main
issue, focused on fair use in comparative advertising, discussed here. As relevant here, defendant (aka Value City) counterclaimed
against its sofa-selling competitor, Ashley, under the Lanham Act and
coordinate Ohio state law.

Value City provided seven examples of purportedly false ads
involving items of furniture offered at a “sale” price along with one or more
higher prices for comparison. In several, the item of furniture was advertised
several months later with different “regular” and “compare” prices. In
addition, Ashley’s ads included “one day” sales and “limited quantity” sales,
but the items in those sales were offered on multiple occasions. Several ads
also said that the items were discounted by a specific amount or percentage,
but the ads didn’t identify the nature of the higher price, such as whether the
higher price was Ashley’s regular price or a competitor’s price. Value City
alleged, “upon information and belief,” that the “sale” prices in the
advertisements were in reality Ashley’s regular prices, and the “regular”
prices were artificially inflated prices used just for ads.

The court found that Value City had failed to plead plausible
false advertising claims. Value City
argued that it was reasonable to infer that serial offers of the same “one day”
deal were false; that comparative prices that “yo-yo up and down” were not
actual prices from a competitor; and that a “compare” price “that suddenly
zooms up by $800” wasn’t based on bona fide sales of a comparable item at a
competing retailer. The court disagreed.
The allegations gave rise to an inference that false advertising was possible,
but not plausible.

Value City’s core argument was that the ad prices changed
over time, but there were a lot of possible explanations for that not involving
false advertising: “Businesses routinely
adjust the prices of their products. The same is true of the allegedly
successive one-day and limited quantity sales. Supplies might be limited at one
point in time but not at a later date.”
As for failure to identify the source of the comparison price, that made
the ads ambiguous, as was the meaning of “one-day” and “limited quantity”—did that
mean forever, or just for now? Thus,
these weren’t plausibly literal falsehoods.

One alleged misrepresentation could constitute literal
falsity: the statement that Ashley’s advertised prices were sales prices when
in fact they were its regular prices. Further, allegations based upon
“information and belief” don’t necessarily fail Twiqbal. However, here, Value City’s “bald assertion” was “conclusory
and speculative,” lacking additional factual allegations to provide
plausibility—even if evidence that might support the allegations was uniquely
in Ashley’s possession.

Also, Value City didn’t plausibly plead materiality or harm
causation in connection with the non-literally false statements at issue.

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